Correlation Between Invesco DB and Vanguard Index

Can any of the company-specific risk be diversified away by investing in both Invesco DB and Vanguard Index at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Invesco DB and Vanguard Index into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Invesco DB Dollar and Vanguard Index Funds, you can compare the effects of market volatilities on Invesco DB and Vanguard Index and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Invesco DB with a short position of Vanguard Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DB and Vanguard Index.

Diversification Opportunities for Invesco DB and Vanguard Index

0.0

Correlation Coefficient

Invesco DB  Vanguard Index

Pay attention - limited upside

The 3 months correlation between Invesco and Vanguard is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Dollar and Vanguard Index Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Index Funds and Invesco DB is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Invesco DB Dollar are associated (or correlated) with Vanguard Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Index Funds has no effect on the direction of Invesco DB i.e., Invesco DB and Vanguard Index go up and down completely randomly.

Pair Corralation between Invesco DB and Vanguard Index

If you would invest  567,027  in Vanguard Index Funds on September 5, 2024 and sell it today you would earn a total of  42,373  from holding Vanguard Index Funds or generate 7.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Invesco DB Dollar  vs.  Vanguard Index Funds

Invesco DB Dollar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco DB Dollar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Invesco DB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Index Funds

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Index Funds are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Vanguard Index showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco DB and Vanguard Index

The main advantage of trading using opposite Invesco DB and Vanguard Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco DB position performs unexpectedly, Vanguard Index can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vanguard Index will offset losses from the drop in Vanguard Index's long position.

The idea behind Invesco DB Dollar and Vanguard Index Funds pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.